July 23 (Bloomberg) -- Government bond yields in the U.S.,
U.K. and Germany fell to records, while stocks dropped and the
euro traded below its lifetime average against the dollar on
concern the region’s debt crisis is deepening. Commodities slid
as a Chinese central-bank adviser said growth may slow further.

The yield on the 10-year U.S. Treasury note declined to
1.44 percent at 4 p.m. New York time after reaching an all-time
low of 1.40 percent. Two-year German yields slumped to as low as
minus 0.08 percent and Spanish and Italian yields jumped. The
Standard & Poor’s 500 Index lost 0.9 percent, with almost eight
shares declining for each one rising. The euro fell for a fourth
day and oil dropped 3.5 percent. Credit-default swaps on Spain
rose as much as 31 basis points to an all-time high of 636.

S&P 500 futures expiring in September lost 0.4 percent to
1,338.30 at 5:30 p.m. in New York as Moody’s Investors Service
cut the outlooks for Germany, the Netherlands and Luxembourg.

“Nothing is really fixed in Europe,” John Manley, chief
equity strategist for Wells Fargo Advantage Funds in New York,
said in a telephone interview. His firm oversees $201 billion.
“The Spanish situation is chronic. And it’s not just Spain.
This isn’t over.”

Greece’s creditors meet this week amid doubts that the
country will meet its bailout commitments. German Vice
Chancellor Philipp Roesler said he’s “very skeptical” that
European leaders will be able to rescue Greece. China’s economic
expansion may cool for a seventh straight quarter to 7.4 percent
in the three months to September, said Song Guoqing, a member of
the People’s Bank of China monetary policy committee.

‘Rising Uncertainty’

After the market closed, Moody’s said it lowered Germany,
the Netherlands and Luxembourg’s Aaa credit rating outlooks to
negative, citing “rising uncertainty” about Europe’s debt
crisis. Risks that Greece may leave the 17-nation euro currency
and “increasing likelihood” of collective support for European
countries such as Spain and Italy were among reasons for the
change, Moody’s said today in a statement.

Germany’s two-year note yield was below zero for the 12th
consecutive day and Spain’s 10-year yields surged 23 basis
points to 7.50 percent, after El Pais reported that six Spanish
regions may ask for aid from the central government. U.S. five-year yields touched an all-time low of 0.54 percent, while 30-year rates also slumped to records. U.K. two-year yields dropped
to an unprecedented 0.05 percent.

The euro weakened 0.3 percent to 95.12 yen after touching
94.24, the lowest since November 2000. It dropped as much as 0.7
percent to $1.2067, a level unseen since June 2010. The
Australian and New Zealand dollars fell at least 0.9 percent as
growth concerns reduced demand for riskier assets.

Europe Stocks

The Stoxx Europe 600 Index lost 2.5 percent as a gauge of
banks retreated to a six-week low. Wereldhave NV sank 13
percent, the most since 1989, after the Dutch real-estate
company cut the value of property in the U.S. and U.K.

Spain and Italy moved to ban short-selling of stocks.
Spain’s stock market regulator, the CNMV, said it was banning
short selling of all stocks for three months, amid “extreme
volatility.” Italy’s Consob said its ban, scheduled to last a
week, was introduced on some banking and insurance shares
because of the “recent performance of stock markets.”

Sales Growth

Better-than-forecast earnings are masking weaker sales
growth in the quarter as U.S. companies improve margins to top
estimates. Sales rose an average 3 percent among 123 members of
the S&P 500 that have reported second-quarter results so far,
according to data compiled by Bloomberg. Only 41 percent of the
reported companies have topped analysts’ estimates on sales,
while 73 percent have beaten on profit, the data show.

The Chicago Board Options Exchange Volatility Index, known
as the VIX, surged 14 percent to 18.60 for the biggest gain in a
month. Europe’s VStoxx Index, which measures the cost of Euro
Stoxx 50 Index option prices, jumped 16 percent to 28.08.

U.S. consumer confidence and equity valuations are
diverging the most in 17 years as price-earnings ratios fall,
according to data compiled by Bloomberg. The S&P 500 has traded
at an average price-earnings multiple of 13.9 this year, 0.18
times the mean level of the Thomson Reuters/University of
Michigan final index of consumer sentiment, according to data
compiled by Bloomberg. The gap is the widest since 1995.

Defensive Stance

Concern about a global slowdown and a deepening of Europe’s
debt crisis has led investors to a more defensive stance since
the S&P 500’s 2012 high in April. Phone, utility, health-care
and consumer staples companies were the only ones to gain among
the 10 groups during that period. Financial and technology
shares tumbled at least 9 percent for the biggest losses.

The S&P GSCI gauge of commodities dropped as much as 3.3
percent today. Oil in New York fell to $88.27 a barrel. Copper
slumped 2.1 percent. China is the biggest buyer of energy and
industrial metals.

Emerging Markets

The MSCI Emerging Markets Index lost 2.7 percent, the
lowest close since June 28. The Hang Seng China Enterprises
Index of mainland companies listed in Hong Kong tumbled 3.1
percent, the most since May 16. Benchmark indexes lost more than
1 percent in India, South Korea, Russia and Turkey.

Roesler, who is Germany’s economy minister, told
broadcaster ARD that Greece is unlikely to be able to meet its
obligations under a euro-area bailout program as its troika of
international creditors, the European Commission, the European
Central Bank and the International Monetary Fund, hold talks
this week in Athens. Should that be the case, the country won’t
receive more bailout payments, Roesler said.